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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to _____________________
Commission file number 0-21526
ZALE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-0675400
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 West Walnut Hill Lane, Irving, Texas 75038-1003
(Address of principal executive offices) (Zip Code)
(972) 580-4000
(Registrant's telephone number, including area code)
None
(Former name, former address and former
fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]. No [ ].
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X]. No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 30, 1996, 35,242,958 shares of the registrant's common stock were
outstanding.
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ZALE CORPORATION AND SUBSIDIARIES
Index
Part 1. Financial Information: Page
----
Item 1. Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information: 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended
October 31,
-------------------
1996 1995
-------- --------
Net Sales $230,779 $214,274
Cost of Sales 120,044 110,170
-------- --------
Gross Margin 110,735 104,104
Selling, General and Administrative Expenses 101,719 98,769
Depreciation and Amortization Expense 2,810 1,075
Unusual Items - Reorganization Recoveries --- (4,486)
-------- --------
Operating Earnings 6,206 8,746
Interest Expense, Net 7,998 6,906
-------- --------
Earnings (Loss) Before Income Taxes
and Extraordinary Item (1,792) 1,840
Income Taxes (654) 653
-------- --------
Earnings (Loss) Before Extraordinary Item (1,138) 1,187
Extraordinary Item:
Loss on Early Extinguishment of Debt,
Net of Income Tax Benefit of $(603) --- (1,096)
-------- --------
Net Earnings (Loss) $ (1,138) $ 91
-------- --------
-------- --------
Earnings (Loss) Per Common Share:
Primary:
Earnings (Loss) Before Extraordinary Item $ (0.03) $ 0.03
Extraordinary Item --- (0.03)
-------- --------
Net Earnings (Loss) $ (0.03) $ 0.00
-------- --------
-------- --------
Assuming Full Dilution:
Earnings (Loss) Before Extraordinary Item $ (0.03) $ 0.03
Extraordinary Item --- (0.03)
-------- --------
Net Earnings (Loss) $ (0.03) $ 0.00
-------- --------
-------- --------
Weighted Average Number of Common
Shares Outstanding:
Primary 35,217 36,291
Assuming Full Dilution 35,217 36,339
See Notes to the Consolidated Financial Statements.
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ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
OCTOBER 31, JULY 31,
1996 1996
----------- -----------
(UNAUDITED)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 55,973 $ 50,046
Customer Receivables, Net 423,185 419,877
Merchandise Inventories 602,607 457,862
Other Current Assets 41,803 25,535
----------- -----------
Total Current Assets 1,123,568 953,320
Property and Equipment, Net 120,750 108,254
Other Assets 43,777 45,737
Deferred Tax Asset, Net 56,500 56,500
----------- -----------
Total Assets $ 1,344,595 $ 1,163,811
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
Current Liabilities:
Current Portion of Long-term Debt $ 10 $ 26
Accounts Payable and Accrued Liabilities 242,891 145,794
Deferred Tax Liability, Net 32,000 32,000
----------- -----------
Total Current Liabilities 274,901 177,820
Non-current Liabilities 34,693 34,627
Long-term Debt 490,736 404,328
Excess of Revalued Net Assets Over
Stockholders' Investment, Net 69,304 70,778
Commitments and Contingencies
Stockholders' Investment:
Preferred Stock --- ---
Common Stock 353 352
Additional Paid-In Capital (Includes
Stock Warrants) 382,616 383,042
Unrealized Gains on Securities 1,279 1,013
Accumulated Earnings 90,713 91,851
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Total Stockholders' Investment 474,961 476,258
----------- -----------
Total Liabilities and Stockholders' Investment $ 1,344,595 $ 1,163,811
----------- -----------
----------- -----------
See Notes to the Consolidated Financial Statements.
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ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
THREE MONTHS THREE MONTHS
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
------------ ------------
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (1,138) $ 91
Non cash expenses, gains and losses:
Depreciation and amortization expense 3,155 1,411
Tax benefit of interperiod loss (772) ---
Utilization of pre-emergence net operating loss --- 3
Unusual item - reorganization recovery --- (3,000)
Other adjustments to reconcile net earnings (loss)
to net cash used in operating activities:
Extraordinary loss on early extinguishment of debt --- 1,699
Changes in:
Customer receivables, net (3,308) 3,724
Merchandise inventories (144,745) (119,515)
Other current assets (16,268) (5,694)
Other assets (7) 560
Accounts payable and accrued liabilities 97,097 96,424
Non-current liabilities 66 823
--------- ----------
Net Cash Used in Operating Activities (65,920) (23,474)
--------- ----------
NET CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (16,843) (15,160)
Dispositions of property and equipment 14 367
Other 1,948 225
--------- ----------
Net Cash Used in Investing Activities (14,881) (14,568)
--------- ----------
NET CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (17) (61,191)
Net borrowings under revolving credit agreement 86,400 28,600
Payment for redemption of Series B Warrants --- (9,264)
Payment of prepayment penalty and other related costs
on early extinguishment of debt --- (1,699)
Debt issue and capitalized financing costs --- (618)
Proceeds from exercise of stock options 347 37
Other (2) ---
--------- ----------
Net Cash Provided by (Used in) Financing Activities 86,728 (44,135)
--------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents 5,927 (82,177)
--------- ----------
Cash and Cash Equivalents at Beginning of Period 50,046 154,905
--------- ----------
Cash and Cash Equivalents at End of Period $ 55,973 $ 72,728
--------- ----------
--------- ----------
</TABLE>
See Notes to the Consolidated Financial Statements.
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ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
(CONTINUED)
Supplemental cash flow information:
THREE MONTHS THREE MONTHS
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
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Interest paid $ 7,869 $ 11,569
Interest received $ 480 $ 1,752
Income taxes paid (net of refunds received) $ 147 $ 378
Restricted cash - at period end date $ 35,439 $ 67,371
See Notes to the Consolidated Financial Statements.
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ZALE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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BASIS OF PRESENTATION
Zale Corporation (the "Company"), founded in 1924, is the largest specialty
retailer of fine jewelry in the United States in terms of both retail sales and
number of stores. The Company had sales of $230.8 million for the three months
ended October 31, 1996 and 1,223 locations at October 31, 1996 throughout the
United States, Guam and Puerto Rico, primarily in regional shopping malls. The
Company conducts business through four distinct divisions. The Zales-Registered
Trademark- Division, with 598 stores, represents the Company's national brand
and is focused on a broad range of mainstream consumers. The Gordon's-SM-
Division operates 325 stores and is being positioned as a major regional jeweler
focusing on twelve regional markets and offering merchandise that is more
contemporary and targeted at regional tastes. The Bailey, Banks & Biddle
Division, formerly the Guild Division, operates 119 upscale jewelry stores under
the Bailey, Banks & Biddle-Registered Trademark- and other locally established
names. The Diamond Park Division manages 177 leased fine jewelry departments in
several major department store chains including Marshall Field's, Dillard's,
Mercantile and Parisian. In addition, the Company operates four outlet stores.
The accompanying Consolidated Financial Statements are those of Zale
Corporation and its wholly-owned subsidiaries as of and for the three month
period ended October 31, 1996. The Consolidated Financial Statements are
unaudited and have been prepared by the Company in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
managements' opinion, all material adjustments and disclosures necessary for a
fair presentation have been made. The accompanying Consolidated Financial
Statements should be read in conjunction with the audited Consolidated Financial
Statements and related notes thereto included in the 1996 Annual Report to
Stockholders filed as an exhibit to the Company's Form 10-K for the fiscal
year ended July 31, 1996. The classifications in use at October 31, 1996 have
been applied to the financial statements for July 31, 1996 and October 31, 1995.
The results of operations for the three month periods ended October 31,
1996 and 1995, are not indicative of the operating results for the full fiscal
year due to the seasonal nature of the Company's business. Seasonal
fluctuations in retail sales historically have resulted in higher earnings in
the quarter of the fiscal year which includes the Christmas selling season.
UNUSUAL ITEMS - REORGANIZATION RECOVERIES
On July 30, 1993 (the "Effective Date"), Zale consummated its plan of
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Plan") and emerged from bankruptcy. Pursuant to the Plan, Zale assigned
certain claims and causes of action and advanced $3.0 million to Jewel Recovery,
L.P., a limited partnership ("Jewel Recovery") which was formed upon Zale's
emergence from bankruptcy. The sole purpose of Jewel Recovery is to prosecute
and settle such assigned claims and causes of action. The general partner of
Jewel Recovery is Jewel Recovery, Inc., a subsidiary of the Company. Its
limited partners are holders of various prior unsecured claims against Zale.
The $3.0 million advance was fully reserved as of the Effective Date as its
collectibility was uncertain.
Jewel Recovery has pursued certain claims and has been awarded significant
recoveries against third parties. During the first quarter of fiscal year 1996,
Zale was notified that it would recover its $3.0 million advance to Jewel
Recovery. The $3.0 million advance was repaid to Zale in December 1995.
Additionally, Shawmut Bank ("Shawmut") was elected as Disbursement Agent
and held all cash and common stock to be used in settlements of creditors
claims. During fiscal 1996, Shawmut provided Zale with information on creditors
whose claim rights have terminated. As a result, during the fiscal year 1996,
Zale recovered cash funds of approximately $1.5 million held by Shawmut related
to cash approved for distribution to pre-confirmation creditors of Zale but not
claimed by such pre-confirmation creditors. The $3.0 million and the $1.5
million recoveries were recorded as unusual items in the Company's first quarter
of fiscal 1996 and are reflected on the Consolidated Statements of Operations
for the three month period ended October 31, 1995 and had an after-tax impact of
$0.08 per share.
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ITEM 2.
ZALE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the
unaudited Consolidated Financial Statements of the Company (and the related
notes thereto) included elsewhere in this report.
RESULT OF OPERATIONS
The following table sets forth certain financial information from the
Company's unaudited Consolidated Statements of Operations expressed as a
percentage of net sales.
Three Months Ended
October 31,
---------------------
1996 1995
------ ------
Net Sales 100.0% 100.0%
Cost of Sales 52.0 51.4
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Gross Margin 48.0 48.6
Selling, General and Administrative Expenses 44.1 46.1
Depreciation and Amortization Expense 1.2 0.5
Unusual Items - Reorganization Recoveries --- (2.1)
------ ------
Operating Earnings 2.7 4.1
Interest Expense, Net 3.5 3.2
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Earnings (Loss) Before Income Taxes
and Extraordinary Item (0.8) 0.9
Income Taxes (0.3) 0.3
------ ------
Earnings (Loss) Before Extraordinary Item (0.5) 0.6
Extraordinary Item:
Loss on Early Extinguishment of
Debt, Net of Income Taxes --- 0.5
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Net Earnings (Loss) (0.5)% 0.1%
------ ------
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THREE MONTHS ENDED OCTOBER 31, 1996 COMPARED TO THREE MONTHS ENDED
OCTOBER 31, 1995
NET SALES. Net Sales for the three months ended October 31, 1996 increased
by $16.5 million to $230.8 million, a 7.7 percent increase compared to the
previous year. The sales increase primarily resulted from new stores as well as
enhanced merchandise assortments, successful product promotions and strong
execution of store programs. Sales for stores open for comparable periods
increased by 4.0 percent.
GROSS MARGIN. Gross Margin as a percentage of net sales decreased by 0.6
percent primarily due to the continuing transition of sales and inventory mix to
more key item merchandise to generate increased volume and achieve greater
market penetration and a greater emphasis on watches and diamond solitaires,
resulting in a product mix with lower gross margins. These merchandise
categories have a lower gross margin rate on average compared to other
merchandise.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, General and
Administrative Expenses decreased 2.0 percent as a percentage of net sales.
Store expenses decreased by 0.9 percent due to store payroll increasing at a
slower rate than sales, lower packaging expenses and increased income from
extended warranty contracts. Bad debt expense was flat relative to sales
resulting in a 0.3 percent improvement as a percentage of sales. In addition,
0.4 percent of the improvement was due to higher income from credit insurance
operations principally as a result of gains on sales of investments.
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EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION EXPENSE,
EXTRAORDINARY ITEM AND UNUSUAL ITEMS. As a result of the factors discussed
above, Earnings Before Interest, Taxes, Depreciation and Amortization Expense,
Extraordinary Item and Unusual Items were $9.0 million and $5.3 million
for the three months ended October 31, 1996 and 1995, respectively.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and Amortization
Expense increased by $1.7 million. Amortization of the Excess of Revalued Net
Assets Over Stockholders' Investment was $1.5 million in both periods. However,
depreciation and amortization of property and equipment increased from $2.5
million to $4.2 million as new assets have been purchased in connection with the
Company's store expansion and remodeling programs.
UNUSUAL ITEMS - REORGANIZATION RECOVERIES. Unusual Items - Reorganization
Recoveries were $4.5 million for the three month period ended October 31, 1995.
There were no unusual items for the current year quarter. See the note to the
Consolidated Financial Statements "UNUSUAL ITEMS - REORGANIZATION RECOVERIES."
INTEREST EXPENSE, NET. Interest Expense, Net was $8.0 million and $6.9
million for the three months ended October 31, 1996 and 1995, respectively.
The increase in interest expense is primarily due to higher borrowings under the
Revolving Credit Agreement and a reduction in interest income due to lower
average balances in short-term investments.
INCOME TAXES. The income tax (benefit) expense for the three month periods
ended October 31, 1996 and 1995 was $(0.7) million and $0.7 million,
respectively, reflecting an effective tax rate of 36.5 percent and 35.5 percent,
respectively. As a result of guidelines regarding accounting for income taxes
of companies utilizing fresh-start reporting, the Company reports earnings on a
fully-taxed basis even though it does not expect to pay any significant income
taxes for the near future. The Company will realize the cash benefit from
utilization of the tax net operating loss carryforward ("NOL") against current
and future tax liabilities. As of July 31, 1996, the Company had a NOL
carryforward (after limitations) of approximately $324 million.
EXTRAORDINARY ITEM. The extraordinary charge of $1.1 million, net of an
income tax benefit of $0.6 million, for the three month period ended October 31,
1995 was the result of the early redemption of the $60.0 million 11.0 Percent
Second Priority Senior Secured Notes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements consist principally of funding inventory
and receivables growth, capital expenditures primarily for new store growth and
renovations, and debt service. As of October 31, 1996, the Company had cash and
cash equivalents of $56.0 million, including $35.4 million restricted primarily
by the collateral requirements under the Receivables Securitization Facility
established by the Company in July 1994 (the "Receivables Securitization
Facility"). The retail jewelry business is highly seasonal, with a significant
proportion of sales and operating income being generated in November and
December of each year. Approximately 39.7 percent and 41.2 percent of the
Company's annual sales were made during the three months ended January 31, 1996
and 1995, respectively, which includes the Christmas selling season. The
Company's working capital requirements fluctuate during the year, increasing
substantially during the fall season as a result of higher planned seasonal
inventory levels.
The Company, through Zale Funding Trust, a limited purpose Delaware
business trust formed to finance customer accounts receivable, has approximately
$380.6 million, net of discount, aggregate principal amount of Receivables
Backed Notes ("ZFT Receivables Notes") issued and outstanding pursuant to a
Receivables Securitization Facility. The ZFT Receivables Notes are secured by a
lien on all customer accounts receivable and mature in July 1999.
The Company has a three-year revolving credit agreement (the "Revolving
Credit Agreement") which provides for revolving credit loans in an aggregate
amount of up to $150.0 million, with a $30.0 million sublimit for letters of
credit. At no time may the total amount of loans outstanding under the
Revolving Credit Agreement exceed the lesser of the total commitment of $150.0
million and a defined borrowing base ($266.6 million at October 31, 1996, based
on a fixed percentage of eligible inventory, as defined).
Under its growth strategy, the Company plans to open approximately 200 new
stores during fiscal 1997 and 1998. These stores are expected to solidify the
Company's core mall business by filling in markets where the Company is
currently under-represented. The Company has opened 63 new stores in the first
four months of fiscal 1997. This growth strategy follows a period where the
Company remodeled or refurbished over 500 of its key existing locations.
Additionally, the Company plans significant upgrades to its management
information systems over the next several years. The Company anticipates
spending approximately $61.0 million on capital expenditures in fiscal year
1997, a 25 percent
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increase over fiscal 1996. Fiscal 1997 capital expenditures are principally
scheduled for the fall in order to have new or renovated stores ready for the
Christmas selling season and in the spring prior to Mother's Day. During the
quarter ended October 31, 1996, the Company made approximately $16.8 million
in capital expenditures, a significant portion of which was used to open 34
new stores.
There has been an increase of approximately $108 million, or 22 percent, in
owned merchandise inventories at October 31, 1996 compared to the balance at
October 31, 1995. The increase in inventory levels is a result of new store
growth, improving the depth and breadth of merchandise available in the stores
to accommodate increasing sales and seasonal purchasing programs being in place
earlier in the current year. As a result of the inventory position and
increased capital expenditures, the Company had outstanding borrowings of $110.0
million under the Revolving Credit Agreement at October 31, 1996, compared to
$28.6 million at October 31, 1995.
Future liquidity will be enhanced to the extent that the Company is able to
realize the cash benefit from utilization of its NOL against current and future
tax liabilities. The cash benefit realized in fiscal 1996 was approximately $23
million. Guidelines regarding accounting for income taxes of companies
utilizing fresh-start reporting, require the Company to report earnings on a
fully-taxed basis even though it does not expect to pay any significant income
taxes for the near future. As of July 31, 1996, the Company had an NOL (after
limitations) of approximately $324 million, which represents up to $126 million
in future tax benefits. The utilization of this asset is subject to
limitations. The most restrictive is the Internal Revenue Code Section 382
annual limitation. The NOL will begin to expire in fiscal year 2002 but can be
utilized through 2009.
Management believes that operating cash flow, amounts available under the
Revolving Credit Agreement and amounts available under the Receivables
Securitization Facility should be sufficient to fund the Company's current
operations, debt service and currently anticipated capital expenditure
requirements.
This Management's Discussion and Analysis contains forward-looking
statements, including statements concerning expected capital expenditures to be
made in the future, expected significant upgrades to its management information
systems over the next several years, the addition of new locations through
either new store openings or strategic acquisitions, and the adequacy of the
Company's sources of cash to finance its current and future operations. These
forward-looking statements involve a number of risks and uncertainties. In
addition to the factors discussed above, among other factors that could cause
actual results to differ materially are the following: the impact of general
economic conditions due to the fact that jewelry purchases are discretionary for
consumers and may be affected by adverse trends in the general economy;
competition in the jewelry business which is fragmented; the variability of
quarterly results and seasonality of the retail business; the ability to improve
productivity in existing stores and to increase comparable store sales; the
availability of alternate sources of merchandise supply in the case of an abrupt
loss of any significant supplier during the three month period leading up to the
Christmas season; the dependence on key personnel who have been hired or
retained since bankruptcy; the changes in regulatory requirements which are
applicable to the Company's business; management's decisions to pursue new
product lines which may involve additional costs; and the risk factors listed
from time to time in the Company's Securities and Exchange Commission reports,
including but not limited to, its Annual Report on Form 10-K for the year ended
July 31, 1996.
INFLATION
In management's opinion, changes in Net Sales and Net Earnings (Loss) that
have resulted from inflation and changing prices have not been material. There
is no assurance; however, that inflation will not materially affect the Company
in the future.
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Part II. - Other Information:
Item 4. Submission of Matters to a Vote of Security Holders
(a) On October 30, 1996, the Annual Meeting of Stockholders of the Company was
held at the Company's headquarters located in Irving, Texas. There were
35,209,433 shares of common stock outstanding on the record date and
entitled to vote at the Annual Meeting.
(b) The following directors were elected:
Name of Nominee Votes For Votes Withheld
--------------- --------- --------------
Robert J. DiNicola 29,494,109 75,583
Glen Adams 29,498,221 71,471
Andrea Jung 29,495,964 73,728
Richard C. Marcus 29,496,402 73,290
Andrew H. Tisch 29,498,180 71,512
(c) The adoption of the amendment to the Zale Corporation Omnibus Stock
Incentive Plan was ratified with 28,565,647 votes for, 773,455 votes
against, 80,216 abstentions and 150,374 broker non-votes.
(d) The appointment of Arthur Andersen LLP as Independent Public Accountants
for the fiscal year ending July 31, 1997 was ratified with 29,509,717 votes
for, 21,109 votes against and 38,866 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Part I Exhibits -
11 Statement re computation of per share earnings.
27 Financial data schedule.
Part II Exhibits -
3 Amended Bylaws of Zale Corporation, dated November 1, 1996.
* 10 Employment Agreement, approved by the Board of Directors on
October 30, 1996, and dated as of August 1, 1996, between Zale
Corporation and Robert DiNicola.
* 10.1 Indemnification Agreement, executed on October 30, 1996, and dated
as of June 6, 1996, between Zale Corporation and Andrea Jung.
* Management Contracts and Compensatory Plans.
(b) Form 8-K-
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZALE CORPORATION
--------------------------
(Registrant)
Date December 13, 1996 /s/ MARK R. LENZ
--------------------------
Mark R. Lenz
Vice-President and Controller
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INDEX TO EXHIBITS
Exhibit Number
- --------------
3 Amended Bylaws of Zale Corporation, dated November 1, 1996.
10 Employment Agreement, approved by the Board of Directors on
October 30, 1996, and dated as of August 1, 1996, between Zale
Corporation and Robert DiNicola.
10.1 Indemnification Agreement, executed on October 30, 1996, and
dated as of June 6, 1996, between Zale Corporation and
Andrea Jung.
11 Statement re computation of per share earnings.
27 Financial data schedule.
<PAGE>
BYLAWS OF
ZALE CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year at such date and time,
within or without the State of Delaware, as the Board of Directors shall
determine; PROVIDED, HOWEVER, that the first annual meeting of the stockholders
of the Corporation after the Effective Time shall be held as soon as practicable
after the filing with the Securities and Exchange Commission of the Annual
Report on Form 10-K of the Corporation for the fiscal year ended March 31, 1994
but in no event later than July 31, 1994 or such earlier date as may be required
under applicable law and the rules of any securities exchange on which the
capital stock of the Corporation may be listed.
SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders for the
transaction of such business as may properly come before the meeting may be
called by order of a majority of Board of Directors, by the Chairman of the
Board of Directors or by the President or Secretary upon the written request of
stockholders holding together at least 25% of all the outstanding shares of the
Common Stock of the Corporation entitled to vote at the meeting, and shall be
held at such date and time, within or without the State of Delaware, as may be
specified by such order. Whenever the place of such a meeting is not so
specified, the meeting shall be held at the principal executive office of the
Corporation.
SECTION 3. NOTICE OF MEETINGS. Written notice of all meetings of the
stockholders, stating the place, date and hour of the meeting and the place
within the city or other municipality or community at which the list of
stockholders may be examined, shall be mailed or delivered to each stockholder
not less than 10 nor more than 60 days prior to the meeting. Notice of any
special meeting shall state in general terms the purpose or purposes for which
the meeting is to be held.
<PAGE>
SECTION 4. STOCKHOLDER LISTS. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by this section or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 5. QUORUM. Except as otherwise provided by law or the Certificate
of Incorporation, a quorum for the transaction of business at any meeting of
stockholders shall consist of the holders of record of a majority of the issued
and outstanding shares of the capital stock of the Corporation entitled to vote
at the meeting, present in person or by proxy. At all meetings of the
stockholders at which a quorum is present, all matters, except as otherwise
provided by law or the Certificate of Incorporation, shall be decided by the
vote of the holders of a majority of the shares entitled to vote thereat present
in person or by proxy. If there be no such quorum, the holders of a majority of
such shares so present or represented may adjourn the meeting from time to time,
without further notice, until a quorum shall have been obtained. When a quorum
is once present it is not broken by the subsequent withdrawal of any
stockholder.
SECTION 6. ORGANIZATION. Meetings of stockholders shall be presided over
by the Chairman, if any, or if none or in the Chairman's absence the
Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the
President, if any, or if none or in the President's absence a Vice-President,
or, if none of the foregoing is present, by a chairman to be chosen by the
stockholders entitled to vote who are present in person or by proxy at the
meeting. The Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the presiding officer of the
meeting shall appoint any person present to act as secretary of the meeting.
SECTION 7. VOTING; PROXIES; REQUIRED VOTE.
(a) At each meeting of stockholders, every stockholder shall be entitled
to vote in person or by proxy appointed by instrument in writing, subscribed by
such stockholder or by such stockholder's duly authorized attorney-in-fact (but
no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer
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period), and, unless the Certificate of Incorporation provides otherwise,
shall have one vote for each share of stock entitled to vote registered in
the name of such stockholder on the books of the Corporation on the
applicable record date fixed by the Board of Directors pursuant to Article
VIII. At all elections of directors the voting may but need not be by ballot
and a plurality of the votes cast there shall elect. Except as otherwise
required by law or the Certificate of Incorporation, any other action shall
be authorized by a majority of the votes cast.
(b) Where a separate vote by a class or classes is required, a majority of
the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter and the affirmative vote of the majority of
shares of such class or classes present in person or represented by proxy at the
meeting shall be the act of such class, unless otherwise provided in the
Corporation's Certificate of Incorporation.
(c) Stockholders may participate in a meeting of stockholders only in
person or by proxy voted or acted upon by an individual attending in person.
Participation by conference telephone or similar communications equipment in a
meeting of stockholders shall not constitute presence in person at the meeting.
SECTION 8. INSPECTORS. The Board of Directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not so
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors, if any, shall determine the number of shares of stock
outstanding and the voting power of each, the shares of stock represented at the
meeting, the existence of a quorum, and the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request
of the person presiding at the meeting, the inspector or inspectors, if any,
shall make a report in writing of any challenge, question or matter determined
by such inspector or inspectors and execute a certificate of any fact found by
such inspector or inspectors.
SECTION 9. NOTICE OF STOCKHOLDER BUSINESS. At an annual or special meeting
of the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual or
special meeting
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business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual or special
meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than 60 days nor
more than 90 days prior to the meeting; PROVIDED, HOWEVER, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 10th
day following the day on which such notice of the date of the annual or
special meeting was mailed or such public disclosure was made or, in the case
of an annual meeting, if earlier than such 10th day, the 60th day before the
first anniversary of the later of (i) the next preceding annual meeting or
(ii) the Effective Date (as defined in the Plan). A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual or special meeting (a) a brief description of the
business desired to be brought before the annual or special meeting and the
reasons for conducting such business at the annual or special meeting, (b)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (c) the class and number of shares of
the Corporation which are beneficially owned by the stockholder and (d) any
material interest of the stockholder in such business. Notwithstanding
anything in the Bylaws to the contrary, no business shall be conducted at any
annual or special meeting except in accordance with the procedures set forth
in this Section 9. The Chairman of the annual or special meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Section 9, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall
not be transacted.
SECTION 10. NOTICE OF STOCKHOLDER NOMINEES. Only persons who are
nominated in accordance with the procedures set forth in this Section 10 shall
be eligible for election as directors. Nominations of persons for election to
the Board of Directors of the Corporation may be made at a meeting of
stockholders by or at the direction of the Board of Directors or by any
stockholder of the Corporation entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in this Section
10. Such nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
PROVIDED, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than
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the close of business on the 10th day following the day on which such notice
of the date of the meeting was mailed or such public disclosure was made or,
in the case of an annual meeting, if earlier than such 10th day, the 60th day
before the first anniversary of the later of (i) the last annual meeting or
(ii) the Effective Date (as defined in the Plan). Such stockholder's notice
shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (i) the name, age,
business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares
of the Corporation which are beneficially owned by such person and (iv) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such person's written consent
to being named in the proxy statement as a nominee and to serving as a
director if elected); and (b) as to the stockholder giving the notice (i) the
name and address, as they appear on the Corporation's books, of such
stockholder and (ii) the class and number of shares of the Corporation which
are owned of record by such stockholder. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which
pertains to the nominee. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the
procedures set forth in this Section 10. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination
was not made in accordance with the procedures prescribed by the Bylaws, and
if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
SECTION 11. ADJOURNMENT. When a meeting is for any reason adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, any business may be transacted which might
have been transacted at the original meeting. If the adjournment is for more
than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
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ARTICLE II
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. Subject to paragraph (b) of Article SIXTH of
the Certificate of Incorporation, the business, property and affairs of the
Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. QUALIFICATION; NUMBER; TERM; REMUNERATION.
(a) Each director shall be at least 18 years of age. A director need not
be a stockholder, a citizen of the United States, or a resident of the State of
Delaware. The specific number of directors constituting the entire Board of
Directors shall be as authorized from time to time exclusively by the
affirmative vote of a majority of the entire Board of Directors. One of the
directors shall be selected by the Board of Directors to be its Chairman. The
use of the phrase "entire Board" or "whole Board" herein refers to the total
number of directors which the Corporation would have if there were no vacancies.
(b) Directors who are elected at an annual meeting of stockholders, and
directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal.
(c) Directors shall be paid their reasonable and necessary expenses, if
any, of attendance at each meeting of the Board of Directors or any committee
thereof and, as shall be authorized by the Board of Directors, may be paid a
fixed sum for attendance at each meeting of the Board of Directors or any
Committee thereof and a stated fee as director. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 3. QUORUM AND MANNER OF VOTING. Except as otherwise provided by
law, a majority of the entire Board shall constitute a quorum. A majority of
the directors present, whether or not a quorum is present, may adjourn a meeting
from time to time to another time and place without notice. The vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 4. PLACES OF MEETINGS. Meetings of the Board of Directors may be
held at any place within or without the State of Delaware, as may from time to
time be fixed by resolution of the Board of Directors, or as may be specified in
the notice of meeting.
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SECTION 5. ANNUAL MEETING. Following the annual meeting of stockholders,
the newly elected Board of Directors shall meet for the purpose of the election
of officers and the transaction of such other business as may properly come
before the meeting. Such meeting may be held without notice immediately after
the annual meeting of stockholders at the same place at which such stockholders'
meeting is held.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such times and places as the Board of Directors shall from time
to time by resolution determine. Notice need not be given of regular meetings
of the Board of Directors held at times and places fixed by resolution of the
Board of Directors.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board or President or by a
majority of the directors then in office.
SECTION 8. NOTICE OF MEETINGS. Subject to Article XIV, notice of the
place, date and time and the purpose or purposes of each special meeting of the
Board of Directors shall be given to each director by mailing, delivering by
facsimile transmission or telephoning the same or by delivering the same
personally, in each case at least five days before the special meeting.
SECTION 9. ORGANIZATION. At all meetings of the Board of Directors, the
Chairman, if any, or if none or in the Chairman's absence or inability to act,
the Vice-Chairman, if any, or in the Vice-Chairman's absence or inability to
act, the President, if he or she is a member of the Board of Directors, or in
the President's absence or inability to act, any Vice-President who is a member
of the Board of Directors, or in such Vice-President's absence or inability to
act, a chairman chosen by the directors, shall preside. The Secretary of the
Corporation shall act as secretary at all meetings of the Board of Directors
when present, and, in the Secretary's absence, the presiding officer may appoint
any person to act as secretary.
SECTION 10. RESIGNATION. Any director may resign at any time upon written
notice to the Corporation and such resignation shall take effect upon receipt
thereof by the President or Secretary, unless otherwise specified in the
resignation. Any or all of the directors may be removed, with or without cause,
at a special meeting of the stockholders, by the holders of a majority of the
shares of stock outstanding and entitled to vote for the election of directors.
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SECTION 11. VACANCIES. Unless otherwise provided in these Bylaws,
vacancies on the Board of Directors, whether caused by resignation, death,
disqualification, removal, an increase in the authorized number of directors or
otherwise, may be filled by the affirmative vote of a majority of the remaining
directors, although less than a quorum, or by a sole remaining director, or at a
special meeting of the stockholders, by the holders of shares entitled to vote
for the election of directors.
SECTION 12. ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all the directors consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors.
SECTION 13. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his or her dissent is entered in the minutes of the meeting or unless such
director files his or her written dissent to such action with the person acting
as the Secretary of the meeting before the adjournment thereof or delivers such
dissent to the Secretary of the Corporation in person, by mail or by telecopy
immediately after the adjournment of the meeting or within a reasonable time
after receipt of the minutes of such meeting at which the action was taken.
Such right to dissent shall not apply to a director who voted in favor of such
action.
SECTION 14. MEETINGS BY TELEPHONE. Members of the Board or any committee
of the directors may, at the election of the Chairman, participate in a meeting
of the Board or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
ARTICLE III
AUDIT COMMITTEE
SECTION 1. DESIGNATION. The Board of Directors shall by a resolution
adopted by a majority of the entire Board designate an Audit Committee of not
less than two directors who are not employees of the Corporation or any
Subsidiary thereof. Members of the Audit Committee may be members of other
committees of the Board of Directors. The members of the Audit Committee shall
elect a Chairman by the affirmative vote of a majority of such members.
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SECTION 2. POWERS. The power and authority of the Audit Committee shall,
to the extent permitted by law, be to (i) initiate or review the results of an
audit or investigation, at any time, into the business affairs of the
Corporation and its Subsidiaries; (ii) review the Corporation's annual and
quarterly reports; (iii) conduct pre-audit and post-audit reviews with the
Corporation's management, financial employees and independent auditors; and (iv)
exercise such other powers and authority as shall from time to time be assigned
thereto by resolution of the Board of Directors.
Management of the Corporation shall inform the Audit Committee regularly
with respect to the business and financial condition of the Corporation and its
Subsidiaries, and shall notify the Audit Committee promptly of (i) any proposed
material change in accounting or financial reporting practices; (ii) any
proposed change of independent auditors; and (iii) such other matters as may
from time to time be designated by the Board of Directors.
In connection with the performance of its duties, the Audit Committee shall
have unrestricted access to and assistance from the officers, employees and
independent auditors of the Corporation, and shall be furnished with such
resources and support from the Corporation as the Audit Committee shall deem
necessary. The Audit Committee shall have standing authority to employ, at the
expense of the Corporation, such experts and professionals as the Audit
Committee shall deem appropriate from time to time.
SECTION 3. REPORTS. The Audit Committee shall report to the Board of
Directors when and as required by the Board of Directors and when and as deemed
appropriate by the Audit Committee, but in any event, not less frequently than
quarterly.
SECTION 4. MEETINGS. Regular meetings of the Audit Committee shall be
held not less frequently than quarterly. Special meetings of the Audit
Committee may be called by or at the request of the Chairman of the Audit
Committee or a majority of the members of the Audit Committee or the Board of
Directors upon five Business Days' notice to the members (unless each member
waives such notice before or after the meeting).
Subject to Article XIV, a notice of the place, date and time and the
purpose or purposes of such meeting of the Audit Committee shall be given by the
Chairman of the Audit Committee and shall be given to each member by mailing,
delivering by facsimile transmission, telephoning the same or by delivering the
same personally, in each case at least five days before the meeting.
The Audit Committee may hold its meetings at the principal office of the
Corporation or at any other place upon which a majority of the committee may at
any time agree.
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ARTICLE IV
COMPENSATION COMMITTEE
SECTION 1. DESIGNATION. The Board of Directors shall by a resolution
adopted by a majority of the entire Board designate a Compensation Committee of
not less than two directors who are not employees of the Corporation or any
Subsidiary thereof. Members of the Compensation Committee may be members of
other committees of the Board of Directors. The members of the Compensation
Committee shall elect a Chairman by the affirmative vote of a majority of such
members.
SECTION 2. POWERS. The power and authority of the Compensation Committee
shall, to the extent permitted by law, be to (v) administer the Corporation's
stock option plan and such other incentive compensation plans for which the
Compensation Committee shall from time to time be designated as the
administrator pursuant to resolution of the Board of Directors; (vi) subject to
final decision by the entire Board of Directors, review proposed compensation of
the Chief Executive Officer and, if and to the extent required by the rules and
regulations promulgated under the Securities Exchange Act of 1934, other
executive officers of the Corporation and its Subsidiaries; (vii) subject to
final decision by the entire Board of Directors, consider senior management
succession and related matters; (viii) prepare and disseminate an annual written
Compensation Committee Report for presentation to the Board; and (ix) exercise
such other powers and authority as shall from time to time be assigned thereto
by resolution of the Board of Directors.
The Compensation Committee Report shall set forth such information as may
be necessary to comply with the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder and such other information as
the committee determines.
In connection with the performance of its duties, the Compensation
Committee shall have unrestricted access to and assistance from the officers,
employees and independent auditors of the Corporation, and shall be furnished
with such resources and support from the Corporation as the Compensation
Committee shall deem necessary or advisable. The Compensation Committee shall
have standing authority to employ, at the expense of the Corporation, such
experts and professionals as the Compensation Committee shall deem appropriate
from time to time.
SECTION 3. REPORTS. The Compensation Committee shall report to the Board
of Directors when and as required by the Board of Directors and when and as
deemed appropriate by the Compensation Committee, but in any event, not less
frequently than semi-annually.
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SECTION 4. MEETINGS. Regular meetings of the Compensation Committee shall
be held not less frequently than semi-annually. Special meetings of the
Compensation Committee may be called by or at the request of the Chairman
thereof or a majority of the members thereof or the Board of Directors, upon
five Business Days' notice to the members (unless each member waives such notice
before or after the meeting).
Subject to Article XIV, a notice of the place, date and time and the
purpose or purposes of such meeting of the Compensation Committee shall be given
by the Chairman of the Compensation Committee and shall be given to each member
by mailing, delivering by facsimile transmission, telephoning the same or by
delivering the same personally, in each case at least five days before the
meeting.
The Compensation Committee may hold its meetings at the principal office of
the Corporation, or at any other place upon which a majority of the Compensation
Committee may at any time agree.
ARTICLE V
EXECUTIVE COMMITTEE
SECTION 1. DESIGNATION. The Board of Directors may by a resolution
adopted by a majority of the entire Board designate an Executive Committee of
one or more directors. Members of the Executive Committee may be members of
other committees of the Board of Directors. If the Executive Committee has more
than one member, the members of the Executive Committee shall elect a Chairman
by the affirmative vote of a majority of such members.
SECTION 2. POWERS. The power and authority of the Executive Committee
shall, to the extent permitted by law, be to (i) authorize the execution and
delivery in the name of the Corporation of any power of attorney, consignment or
purchase agreement, lease, construction or other contract, loan agreement, bond
or other obligation or instrument, which power of attorney, agreement, lease,
contract, bond, obligation or instrument (each, an "instrument") is entered into
in the ordinary course of business and involves the payment, under such
instrument and under any related instrument entered into by any Material
Subsidiary similarly authorized, by the Corporation and such Material Subsidiary
of an aggregate consideration of less than $2,500,000; (ii) authorize the
opening of bank accounts; (iii) appoint or remove financial or other entities or
persons as agents of the Corporation; (iv) authorize the filing of reports with
governmental agencies; (v) appoint or remove officers of the Corporation other
than the Chairman, the Vice-Chairman, if any, the President and Chief Executive
Officer; and (vi) authorize such other transactions in the ordinary course of
business of the Corporation so long as any such
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transaction or series of substantially related transactions involves the
payment by the Corporation of an aggregate consideration of less than
$2,500,000.
SECTION 3. REPORTS. The Executive Committee shall report to the Board of
Directors when and as required by the Board of Directors and when and as deemed
appropriate by the Executive Committee, but in any event, not less frequently
than by the next succeeding meeting of the entire Board of Directors.
SECTION 4. MEETINGS. If the Executive Committee has more than one member,
special meetings of the Executive Committee may be called by or at the request
of the Chairman of the Executive Committee or a majority of the members of the
Executive Committee or the Board of Directors upon 24 hours' notice to members
(unless each member waives such notice before or after the meeting).
If the Executive Committee has more than one member, subject to Article
XIV, a notice of the place, date and time and the purpose or purposes of such
meeting of the Executive Committee shall be given by the Chairman of the
Executive Committee and shall be given to each member by mailing, delivering by
facsimile transmission, telephoning the same or by delivering the same
personally, in each case at least 24 hours before the meeting.
The Executive Committee may hold its meetings at the principal office of
the Corporation or at any other place upon which a majority of the committee may
at any time agree.
ARTICLE VI
COMMITTEES GENERALLY
SECTION 1. APPOINTMENT. The Board of Directors by a resolution adopted by
a majority of the entire Board may from time to time appoint one or more
committees, in addition to the Audit Committee, the Compensation Committee and
the Executive Committee, for any purpose or purposes, to the extent lawful,
which shall have such powers as shall be determined and specified by the Board
of Directors in the resolution of designation.
SECTION 2. PROCEDURES, QUORUM AND MANNER OF ACTING. Each committee shall
fix its own rules of procedure, and, except as otherwise provided in Articles
III, IV and V, shall meet where and as provided by such rules or by resolution
of the Board of Directors. Except as otherwise provided by law, the presence of
a majority of the then appointed members of a committee shall constitute a
quorum for the transaction of business by that committee, and in every case
where a quorum is present the affirmative vote of a majority of the members of
the committee present shall be the act of the
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committee. Each member of a committee shall have one vote on all matters
that come before the committee. Each committee shall keep minutes of its
proceedings, and actions taken by a committee shall be reported to the Board
of Directors.
SECTION 3. ACTION BY WRITTEN CONSENT. Any action required or permitted to
be taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if all the members of the committee consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the committee.
SECTION 4. TERM; TERMINATION. In the event any person shall cease to be a
director of the Corporation, such person shall simultaneously therewith cease to
be a member of any committee designated by the Board of Directors.
Any member of any committee may be removed at any time, with or without
cause, by a resolution of a majority of the entire Board.
Any vacancy in any committee occurring for any reason whatsoever may be
filled in accordance with a resolution of a majority of the entire Board.
ARTICLE VII
OFFICERS
SECTION 1. ELECTION AND QUALIFICATIONS. The Board of Directors shall
elect the officers of the Corporation, which shall include a Chairman of the
Board, a Vice-Chairman of the Board, if any, a President and a Secretary, and
may include, by election or appointment, one or more Senior Vice-Presidents (any
one or more of whom may be given an additional designation of rank or function),
a Treasurer and such Assistant Secretaries, such Assistant Treasurers and such
other officers as the Board may from time to time deem proper. Each officer
shall have such powers and duties as may be prescribed by these Bylaws and as
may be assigned consistent with the Bylaws by the Board of Directors or the
President. Any two or more offices may be held by the same person, except the
President may not also be the Secretary.
SECTION 2. TERM OF OFFICE AND REMUNERATION. The term of office of all
officers shall be one year and until their respective successors have been
elected and qualified, but any officer may be removed from office, either with
or without cause, at any time by the Board of Directors. Any vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors. Subject to Article IV, the remuneration of all
officers of the Corporation may be fixed by the Board of Directors or in such
manner as the Board of Directors shall provide.
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SECTION 3. RESIGNATION; REMOVAL. Any officer may resign at any time upon
written notice to the Corporation and such resignation shall take effect upon
receipt thereof by the President or Secretary, unless otherwise specified in the
resignation. Any officer shall be subject to removal, with or without cause, at
any time by vote of a majority of the entire Board.
SECTION 4. CHAIRMAN AND VICE-CHAIRMAN OF THE BOARD. The Chairman of the
Board of Directors shall be a director and shall preside at all meetings of the
Board of Directors and shall have such other powers and duties as may from time
to time be assigned by the Board of Directors. The Vice-Chairman of the Board
of Directors shall assist the Chairman of the Board of Directors in the
execution of his duties and shall have such other authority as from time to time
may be assigned by the Board of Directors or the President.
SECTION 5. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President shall be
the chief executive officer of the Corporation and shall have such duties as
customarily pertain to that office. The President shall have general management
and supervision of the property, business and affairs of the Corporation and
over its other officers; may appoint and remove assistant officers and other
agents and employees; and may execute and deliver in the name of the Corporation
powers of attorney, contracts, bonds and other obligations and instruments.
SECTION 6. SENIOR VICE-PRESIDENT. A Senior Vice-President may execute and
deliver in the name of the Corporation contracts and other obligations and
instruments pertaining to the regular course of the duties of said office, and
shall have such other authority as from time to time may be assigned by the
Board of Directors or the President.
SECTION 7. TREASURER. The Treasurer shall in general have all duties
incident to the position of Treasurer and such other duties as may be assigned
by the Board of Directors or the President.
Subject to the provisions of Article III hereof, the Treasurer shall
prescribe and maintain the methods and systems of accounting to be followed,
keep complete books and records of accounts, prepare and file all local, state
and federal tax returns, prescribe and maintain an adequate system of internal
audit, and prepare and furnish to the Chief Executive Officer, the Board and the
Audit Committee statements of account showing the financial position of the
Corporation and the results of its operations.
SECTION 8. SECRETARY. The Secretary shall in general have all the duties
incident to the office of Secretary and such other duties as may be assigned by
the Board of Directors or the President.
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SECTION 9. ASSISTANT OFFICERS. Any assistant officer shall have such
powers and duties of the officer such assistant officer assists as such officer
or the Board of Directors shall from time to time prescribe.
ARTICLE VIII
BOOKS AND RECORDS
SECTION 1. LOCATION. The books and records of the Corporation may be kept
at such place or places within or outside the State of Delaware as the Board of
Directors or the respective officers in charge thereof may from time to time
determine. The record books containing the names and addresses of all
stockholders, the number and class of shares of stock held by each and the dates
when they respectively became the owners of record thereof shall be kept by the
Secretary as prescribed in the Bylaws and by such officer or agent as shall be
designated by the Board of Directors.
SECTION 2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other
corporate notices may be delivered personally or mailed to each stockholder at
the stockholder's address as it appears on the records of the Corporation.
SECTION 3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors and which record date shall not be more than 60 nor
less than 10 days before the date of such meeting. If no record date is fixed
by the Board of Directors, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
and which record date shall be not more than
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60 days prior to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
ARTICLE IX
CERTIFICATES REPRESENTING STOCK
SECTION 1. CERTIFICATES; SIGNATURES. The shares of the Corporation shall
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate, signed by or in the name of the Corporation by
the Chairman or Vice-Chairman of the Board of Directors, or the President or a
Senior Vice-President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, representing the number
of shares registered in certificate form. Any and all signatures on any such
certificate may be facsimiles. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
The name of the holder of record of the shares represented thereby, with the
number of such shares and the date of issue, shall be entered on the books of
the Corporation.
SECTION 2. TRANSFERS OF STOCK. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if any,
shares of capital stock shall be transferable on the books of the Corporation
only by the holder of record thereof in person, or by duly authorized attorney,
upon surrender and cancellation of certificates for a like number of shares,
properly endorsed, and the payment of all taxes due thereon.
SECTION 3. FRACTIONAL SHARES. The Corporation may, but shall not be
required to, issue certificates for fractions of a share where necessary to
effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a stockholder except as therein
provided.
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The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer
and registration of certificates representing shares of the Corporation.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may
issue a new certificate of stock in place of any certificate, theretofore issued
by it, alleged to have been lost, stolen or destroyed, and the Board of
Directors may require the owner of any lost, stolen or destroyed certificate, or
his legal representative, to give the Corporation a bond sufficient to indemnify
the Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate.
ARTICLE X
DIVIDENDS
Subject always to the provisions of law and the Certificate of
Incorporation, the Board of Directors shall have full power to determine whether
any, and, if any, what part of any, funds legally available for the payment of
dividends shall be declared as dividends and paid to stockholders; the division
of the whole or any part of such funds of the Corporation shall rest wholly
within the lawful discretion of the Board of Directors, and it shall not be
required at any time, against such discretion, to divide or pay any part of such
funds among or to the stockholders as dividends or otherwise; and before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, thinks proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of Directors
shall think conducive to the interest of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE XI
RATIFICATION
Any transaction, questioned in any law suit on the ground of lack of
authority, defective or irregular execution, adverse interest of director,
officer or stockholder, non-disclosure, miscomputation, or the application of
improper principles or practices of accounting, may be ratified before or after
judgment, by the Board of Directors or by the stockholders, and if so ratified
shall have the same force and effect as if the questioned transaction had been
originally duly authorized. Such ratification shall be binding upon the
Corporation and its stockholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned transaction.
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ARTICLE XII
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the Corporation
and shall be in such form and contain such other words and/or figures as the
Board of Directors shall determine. The corporate seal may be used by printing,
engraving, lithographing, stamping or otherwise making, placing or affixing, or
causing to be printed, engraved, lithographed, stamped or otherwise made, placed
or affixed, upon any paper or document, by any process whatsoever, an
impression, facsimile or other reproduction of said corporate seal.
ARTICLE XIII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board of Directors. Unless otherwise fixed by the Board of
Directors, the fiscal year of the Corporation shall be the 12 month period
ending on March 31 in each year.
ARTICLE XIV
WAIVER OF NOTICE
Whenever notice is required to be given by these Bylaws or by the
Certificate of Incorporation or by law, a written waiver thereof, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XV
BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC.
SECTION 1. BANK ACCOUNTS AND DRAFTS. In addition to such bank accounts as
may be authorized by the Board of Directors, the primary financial officer or
any person designated by said primary financial officer, whether or not an
employee of the Corporation, may authorize such bank accounts to be opened or
maintained in the name and on behalf of the Corporation as he may deem necessary
or appropriate, payments from such bank accounts to be made upon and according
to the check of the Corporation in accordance with the written instructions of
said primary financial officer, or other person so designated by the Treasurer.
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SECTION 2. CONTRACTS. The Board of Directors may authorize any person or
persons, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other obligations
or instruments, and such authority may be general or confined to specific
instances.
SECTION 3. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. Except as may
otherwise be provided in the Certificate of Incorporation with respect to any
Material Subsidiary, the Chairman, the President or any other person designated
by either of them shall have the power and authority to execute and deliver
proxies, powers of attorney and other instruments on behalf of the Corporation
in connection with the rights and powers incident to the ownership of stock by
the Corporation. Except as may otherwise be provided in the Certificate of
Incorporation with respect to any Material Subsidiary, the Chairman, the
President or any other person authorized by proxy or power of attorney executed
and delivered by either of them on behalf of the Corporation may attend and vote
at any meeting of stockholders of any company in which the Corporation may hold
stock, and may exercise on behalf of the Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, or
otherwise as specified in the proxy or power of attorney so authorizing any such
person. Except as may otherwise be provided in the Certificate of Incorporation
with respect to any Material Subsidiary, the Board of Directors, from time to
time, may confer like powers upon any other person.
SECTION 4. FINANCIAL REPORTS. The Board of Directors may appoint the
primary financial officer or other fiscal officer to cause to be prepared and
furnished to stockholders entitled thereto any special financial notice and/or
financial statement, as the case may be, which may be required by any provision
of law.
ARTICLE XVI
AMENDMENTS
The Board of Directors shall have power to adopt, amend or repeal Bylaws in
accordance with the Certificate of Incorporation. Bylaws adopted by the Board
of Directors may be repealed or changed, and new Bylaws made, by the
stockholders in accordance with the Certificate of Incorporation, and the
stockholders may prescribe that any Bylaw made by them shall not be altered,
amended or repealed by the Board of Directors.
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ARTICLE XVII
MISCELLANEOUS
All capitalized terms used herein but not defined herein shall have the
meanings assigned to such terms in the Certificate of Incorporation.
Effective as of November 1, 1996.
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EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of August 1, 1996, is by and between Zale
Corporation, a Delaware corporation ("Company"), and Robert DiNicola
("Executive").
WHEREAS, Executive and Company desire to enter into a new employment
agreement which supercedes in its entirety the Agreement dated as of March 14,
1994;
NOW, THEREFORE, in consideration of the foregoing recital and of the mutual
covenants set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. EMPLOYMENT. Executive agrees to enter into the employment of the
Company, and the Company agrees to employ Executive, on the terms and conditions
set forth in this Agreement. Executive agrees during the term of his employment
to devote substantially all of his business time, efforts, skills and abilities
to the performance of his duties as stated in this Agreement and to the
furtherance of the Company's business.
Executive's job title will be Chairman of the Board and Chief Executive
Officer and his duties will be those as are designated by the Board of Directors
of the Company ("Board"), consistent with the position of Chairman of the Board
and Chief Executive Officer. Executive further agrees to serve, without
additional compensation, as an officer or director, or both, of any subsidiary,
division or affiliate of the Company or any other entity in which the Company
holds an equity interest, provided, however, that (a) the Company shall
indemnify Executive from liabilities in connection with serving in any such
position to the same extent as his indemnification rights pursuant to the
Company's Certificate of Incorporation, By-laws and applicable Delaware law, and
(b) such other position shall not materially detract from the responsibilities
of Executive pursuant to this Section 1 or his ability to perform such
responsibilities.
2. COMPENSATION. (a) BASE SALARY. During the term of Executive's
employment with the Company pursuant to this Agreement, the Company shall pay to
Executive as compensation for his services an annual base salary of not less
than $850,000 payable semi-monthly ("Base Salary"). Executive's Base Salary
will be payable in arrears in accordance with the Company's normal payroll
procedures and will be reviewed annually and subject to upward adjustment at the
discretion of the Board or an authorized Committee or representative thereof.
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(b) INCENTIVE BONUS. Executive's incentive compensation program for
the term of this Agreement shall be determined under the Company's Executive
Bonus Program, established by the Board in its discretion. Executive is
eligible to receive up to 110% of his base salary in accordance with the terms
and conditions of the Executive Bonus Program.
(c) VACATION. Executive shall be entitled to a reasonable vacation of
not less than 5 weeks each year of the term of this Agreement. Vacations not
taken shall not be cumulative or carried over to a subsequent year.
(d) EXECUTIVE PERQUISITES. Executive shall be entitled to receive
such executive perquisites and fringe benefits as are provided to top executives
and their families under the Company's Key Executive Program in effect from time
to time and such other benefits as are customarily available to executives of
the Company and their families.
(e) CLUB MEMBERSHIP. The Company shall pay all fees for membership
by Executive in a club of his choice, together with the dues therefor for use by
Executive for conferences, meetings and entertainment within the scope of his
employment.
(f) STOCK OPTIONS. The Compensation Committee of the Board joins
in executing this Agreement for the purpose of confirming that, on July 9, 1996,
the Committee granted Executive an incentive option (to the extent permitted by
law) and to the extent not so permitted, a non-qualified stock option, pursuant
to the Company's Omnibus Stock Incentive Plan, entitling Executive to purchase
500,000 shares of Common stock of the Company at an exercise price equal to 100%
of the fair market value per share on the date of the grant, as that phrase is
defined in the Company's Omnibus Stock Incentive Plan. As provided under such
Plan, the options will vest 25% on the first anniversary of the grant and an
additional 25% on each anniversary thereafter, so that the options will be fully
exercisable four years from the date of grant. The options will expire ten
years after the date of grant.
(g) TAX WITHHOLDING. The Company has the right to deduct from any
compensation payable to Executive under this Agreement social security (FICA)
taxes and all federal, state, municipal or other such taxes or charges as may
now be in effect or that may hereafter be enacted or required.
(h) LIFE INSURANCE. In addition to the Company's group life
insurance coverage, the Company shall provide Executive with additional life
insurance coverage in the amount of $2,000,000.
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(i) MEDICAL INSURANCE. In addition to the Company's group medical
insurance coverage and/or Executive Medical Insurance Plan ("Medical Plans"),
the Company shall reimburse Executive for all additional medical expenses
incurred by Executive which are defined as reimbursable under the Company's
Medical Plans.
3. TERM. The term of Executive's employment under this Agreement will
begin on August 1, 1996 (the "Commencement Date") and will continue for five
years.
Notwithstanding the foregoing, this Agreement (other than Sections 5
through 11 hereof) will terminate upon the earliest to occur of: (a) the date
the Company terminates Executive's employment, (b) the date Executive resigns
from the Company, (c) notice from the Company following the disability of
Executive that renders him unable to perform his obligations under this
Agreement for at least 90 days out of any 120 consecutive day period, or (d) the
death of Executive, provided, however, that in the event of the death of the
Executive, the Company shall pay to the estate of the Executive twelve months of
Base Salary commencing with the next regular pay period after the date of his
death ("Death Benefit"). Any Death Benefit otherwise payable by the Company
shall be offset by (1) proceeds from any life insurance furnished to Executive
by the Company, and (2) any other life insurance which the Company elects to
purchase on the life of the Executive, the proceeds of which are payable to his
estate.
4. TERMINATION BY THE COMPANY; DEFINITION OF CAUSE. Executive's
employment under this Agreement (and his right to receive the compensation set
forth in Section 2 hereof) may be terminated by the Company at any time with
"Cause", or (subject to the rights of Executive pursuant to Section 5 hereof)
without "Cause". As used herein, "Cause" shall mean:
(a) any dishonest or fraudulent act or course of conduct by
Executive, or other act or course of conduct by Executive constituting a
criminal act or which results in gain or personal enrichment of Executive at the
expense of the Company, or the commission by Executive of an act or a course of
conduct involving moral turpitude; or
(b) Executive's insubordination to the Board or willful violation of
this Agreement or of policies established by the Board, provided, however, that
no such termination pursuant to this clause (b) shall be effective unless the
Company shall have given Executive ten days' prior written notice of any
insubordination or willful violation of this Agreement or such policies which,
if not discontinued or corrected would lead to his termination for Cause.
Executive will have the opportunity
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to cure such non-complying conduct or performance within such 10-day
period. Termination pursuant to this clause (b) shall be effective with
respect to matters referred to in this clause (b) ten days after such
notice unless such conduct has been cured in the good faith judgment of
the board.
5. SEVERANCE PAYMENT ON TERMINATION WITHOUT CAUSE.
(a) TERMINATION WITHOUT CAUSE. If Executive's employment is
terminated by the Company without Cause during the term of this Agreement, the
Company shall be obligated to continue to pay Executive his Base Salary for the
remainder of the term of this Agreement; provided, however, that such payments
are subject to reduction in accordance with the provisions of Section 5(b)
hereof. Executive shall also continue to receive the fringe benefits he is
entitled to receive pursuant to Sections 2(c), (d), (e) and (h) hereof for the
first twelve months of the period he is entitled to receive such Base Salary
payments. In the event of termination without Cause, the Executive's right to
exercise the stock options to be granted hereunder shall be governed by the
terms of the Company's Omnibus Stock Incentive Plan, as may be in effect at that
time.
(b) OFFSET. If Executive's employment with the Company is
terminated pursuant to Section 5(a), this clause (b) shall apply. The payments
which would have been due and payable in accordance with Section 5(a) hereof
shall be reduced by an amount equal to any amounts that Executive receives in
connection with any other employment during the period such payments pursuant to
Section 5(a) would have been due and payable. For purposes of this Section (b),
any fringe benefits received by Executive in connection with any other
employment that are reasonably comparable, but not necessarily as beneficial, to
Executive as the fringe benefits then being provided by the Company pursuant to
Section 5(a) hereof, shall be deemed to be the equivalent of, and shall
terminate the Company's responsibility to continue providing, the fringe
benefits then being provided by the Company pursuant to Section 5(a) hereof.
The Company acknowledges that, if Executive's employment with the Company is
terminated pursuant to Section 5(a), Executive shall have no duty to mitigate
his damages.
(c) GENERAL RELEASE. Acceptance by Executive of any amounts
pursuant to this Section 5 shall constitute a full and complete release by
Executive of any and all claims Executive may have against the Company, its
officers, directors and affiliates, including, but not limited to, claims he
might have relating to Executive's cessation of employment with the Company;
provided, however, that there may properly be excluded from the scope of such
general release the following:
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(i) claims that Executive may have against the Company for
reimbursement of ordinary and necessary business expenses incurred by him
during the course of his employment;
(ii) claims that may be made by the Executive for payment of
Base Salary, fringe benefits or stock options properly due to him; or
(iii) claims respecting matters for which the Executive is
entitled to be indemnified under the Company's Certificate of Incorporation
or Bylaws, respecting third party claims asserted or third party litigation
pending or threatened against the Executive.
A condition to Executive's receipt of any amounts pursuant to this Section 5
shall be Executive's execution and delivery of a general release as described
above. In exchange for such release, the Company shall, if Executive's
employment is terminated without Cause, provide a release to Executive, but only
with respect to claims against Executive which are actually known to the Company
as of the time of such termination.
6. EFFECT OF CHANGE IN CONTROL. (a) If a Change in Control (as
hereinafter defined) shall occur on or prior to the termination of this
Agreement, the term of this Agreement shall be automatically extended to a date
which is not less than 30 months from the date on which such Change in Control
is consummated (if such period is longer than the then unexpired term of this
Agreement), unless the Company has given notice to the Executive that it is
terminating this Agreement pursuant to Section 4 prior to such Change in
Control, provided, however, that in the event the Company gives such notice of
termination at a time that it is actively considering participating in a Change
in Control, and such Change in Control is consummated within four months
following such notice, Executive shall be entitled to the benefits of this
Section 6 as if he had not received notice of termination prior to the Change in
Control.
(b) As used herein, a "Change in Control" shall be deemed to have
occurred if, subsequent to the date hereof, (1) any "person" (as such term is
defined in Section 13(d) of the Securities Exchange Act of 1934)becomes the
beneficial owner, directly or indirectly, of either (A) thirty percent (30%) of
the Company's outstanding Common Stock or (B) securities of the Company
representing thirty percent (30%) of the combined voting power of the Company's
then outstanding voting securities, or (2) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company cease, at any time after the beginning of such
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period, for any reason to constitute a majority of the Board of
Directors of the Company unless the election of each new director was
nominated or ratified by at least two-thirds of the directors still in
office who were directors at the beginning of such two-year period.
(c) Notwithstanding any other provision of this Agreement, if the
aggregate present value of the "parachute payments" to the Executive, determined
under Section 280G(b) of the Internal Revenue Code of 1986, as amended ("Code"),
is at least three times the "base amount" determined under such Section 280G,
then the Base Salary otherwise payable under this Agreement and any other amount
payable hereunder or any other severance plan, program, policy or obligation of
the Company or any other affiliate thereof shall be reduced so that the
aggregate present value of the "parachute payments" to the Executive, determined
under such Section 280G, does not exceed 2.99 times the base amount. In no
event, however, shall any benefit provided hereunder be reduced to the extent
such benefit is specifically excluded by Section 280G(b) of the Code as a
"parachute payment" or as an "excess parachute payment." Any decisions
regarding the requirement or implementation of such reductions shall be made by
such tax counsel as may be selected by the Company and acceptable to Executive.
7. NONSOLICITATION OF EMPLOYEES. For a period of two years after the
termination or cessation of his employment with the Company for any reason
whatsoever, Executive shall not, on his own behalf or on behalf of any other
person, partnership, association, corporation, or other entity, solicit or in
any manner attempt to influence or induce any employee of the Company or its
subsidiaries or affiliates (known by the Executive to be such) to leave the
employment of the Company or its subsidiaries or affiliates, nor shall he use or
disclose to any person, partnership, association, corporation or other entity
any information obtained while an employee of the Company concerning the names
and addresses of the Company's employees.
8. NONDISCLOSURE OF TRADE SECRETS. During the term of this Agreement,
Executive will have access to and become familiar with various trade secrets and
proprietary and confidential information of the Company, its subsidiaries and
affiliates, including, but not limited to, processes, computer programs,
compilations of information, records, sales procedures, customer requirements,
pricing techniques, customer lists, methods of doing business and other
confidential information (collectively, referred to as "Trade Secrets") which
are owned by the Company, its subsidiaries and/or affiliates and regularly used
in the operation of its business, and as to which the Company, its subsidiaries
and/or affiliates take precautions to prevent
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dissemination to persons other than certain directors, officers and
employees. Executive acknowledges and agrees that the Trade Secrets (1)
are secret and not known in the industry; (2) give the Company or its
subsidiaries or affiliates an advantage over competitors who do not know
or use the Trade Secrets; (3) are of such value and nature as to make it
reasonable and necessary to protect and preserve the confidentiality and
secrecy of the Trade Secrets; and (4) are valuable, special and unique
assets of the Company or its subsidiaries or affiliates, the disclosure
of which could cause substantial injury and loss of profits and goodwill
to the Company or its subsidiaries or affiliates. Executive may not use
in any way or disclose any of the Trade Secrets, directly or indirectly,
either during the term of this Agreement or at any time thereafter,
except as required in the course of his employment under this Agreement,
if required in connection with a judicial or administrative proceeding,
or if the information becomes public knowledge other than as a result of
an unauthorized disclosure by the Executive. All files, records,
documents, information, data and similar items relating to the business
of the Company, whether prepared by Executive or otherwise coming into
his possession, will remain the exclusive property of the Company and
may not be removed from the premises of the Company under any
circumstances without the prior written consent of the Board (except in
the ordinary course of business during Executive's period of active
employment under this Agreement), and in any event must be promptly
delivered to the Company upon termination of Executive's employment with
the Company. Executive agrees that upon his receipt of any subpoena,
process or other request to produce or divulge, directly or indirectly,
any Trade Secrets to any entity, agency, tribunal or person, Executive
shall timely notify and promptly hand deliver a copy of the subpoena,
process or other request to the Board. For this purpose, Executive
irrevocably nominates and appoints the Company (including any attorney
retained by the Company), as his true and lawful attorney-in-fact, to
act in Executive's name, place and stead to perform any act that
Executive might perform to defend and protect against any disclosure of
any Trade Secrets.
9. SEVERABILITY. The parties hereto intend all provisions of Sections 7
and 8 hereof to be enforced to the fullest extent permitted by law.
Accordingly, should a court of competent jurisdiction determine that the scope
of any provision of Section 7 or 8 hereof is too broad to be enforced as
written, the parties intend that the court reform the provision to such narrower
scope as it determines to be reasonable and enforceable. In addition, however,
Executive agrees that the nonsolicitation and nondisclosure agreements set forth
above each constitute separate agreements independently supported by good and
adequate consideration shall be severable from the other provisions of, and
shall survive, this Agreement. The existence of any claim or
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cause of action of Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the covenants of Executive contained in
the nonsolicitation and nondisclosure agreements. If any provision of
this Agreement is held to be illegal, invalid or unenforceable under
present or future laws effective during the term hereof, such provision
shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision never
constituted a part of this Agreement; and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added as part of this Agreement,
a provision as similar in its terms to such illegal, invalid or
enforceable provision as may be possible and be legal, valid and
enforceable.
10. ARBITRATION - EXCLUSIVE REMEDY.
(a) The parties agree that the exclusive remedy or method of
resolving all disputes or questions arising out of or relating to this Agreement
shall be arbitration. Arbitration shall be held in Dallas, Texas by three
arbitrators, one to be appointed by the Company, a second to be appointed by
Executive, and a third to be appointed by those two arbitrators. The third
arbitrator shall act as chairman. Any arbitration may be initiated by either
party by written notice ("Arbitration Notice") to the other party specifying the
subject of the requested arbitration and appointing that party's arbitrator.
(b) If (i) the non-initiating party fails to appoint an arbitrator
by written notice to the initiating party within ten days after the Arbitration
Notice, or (ii) the two arbitrators appointed by the parties fail to appoint a
third arbitrator within ten days after the date of the appointment of the second
arbitrator, then the American Arbitration Association, upon application of the
initiating party, shall appoint an arbitrator to fill that position.
(c) The arbitration proceeding shall be conducted in accordance with
the rules of the American Arbitration Association. A determination or award
made or approved by at least two of the arbitrators shall be the valid and
binding action of the arbitrators. The costs of arbitration (exclusive of the
expense of a party in obtaining and presenting evidence and attending the
arbitration and of the fees and expenses of legal counsel to a party, all of
which shall be borne by that party) shall be borne by the Company only if
Executive receives substantially the relief sought by him in the arbitration,
8
<PAGE>
whether by settlement, award or judgment; otherwise, the costs shall be borne
equally between the parties. The arbitration determination or award shall be
final and conclusive on the parties, and judgment upon such award may be entered
and enforced in any court of competent jurisdiction.
11. MISCELLANEOUS.
(a) NOTICES. Any notices, consents, demands, requests, approvals
and other communications to be given under this Agreement by either party to the
other must be in writing and must be either (i) personally delivered, (ii)
mailed by registered or certified mail, postage prepaid with return receipt
requested, (iii) delivered by overnight express delivery service or same-day
local courier service, or (iv) delivered by telex or facsimile transmission, to
the address set forth below, or to such other address as may be designated by
the parties from time to time in accordance with this Section 11(a):
If to the Company: Zale Corporation
901 W. Walnut Hill Lane
Irving, Texas 75038
Attention: Alan P. Shor,
Senior Vice President and
General Counsel
If to Executive: Robert DiNicola
3800 Beverly Drive
Dallas, Texas 75205
Notices delivered personally or by overnight express delivery service
or by local courier service are deemed given as of actual receipt. Mailed
notices are deemed given three business days after mailing. Notices delivered
by telex or facsimile transmission are deemed given upon receipt by the sender
of the answer back (in the case of a telex) or transmission confirmation (in the
case of a facsimile transmission).
(b) ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, either oral or written, between the parties with respect to the
subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect to the subject matter of this
Agreement.
(c) MODIFICATION. No change or modification of this Agreement is
valid or binding upon the parties, nor will any waiver of any term or condition
in the future be so binding, unless the change or modification or waiver is in
writing and signed by the parties to this Agreement.
9
<PAGE>
(d) GOVERNING LAW AND VENUE. The parties acknowledge and agree that
this Agreement and the obligations and undertakings of the parties under this
Agreement will be performable in Irving, Dallas County, Texas. This Agreement
is governed by, and construed in accordance with, the laws of the State of
Delaware. If any action is brought to enforce or interpret this Agreement,
venue for the action will be in Dallas County, Texas.
(e) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which constitutes an original, but all of which constitutes one
document.
(f) COSTS. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, each party shall bear its own
costs and expenses.
(g) ESTATE. If Executive dies prior to the expiration of the term
of employment or during a period when monies are owing to him, any monies that
may be due him from the Company under this Agreement as of the date of his death
shall be paid to his estate and as when otherwise payable.
(h) ASSIGNMENT. The Company shall have the right to assign this
Agreement to its successors or assigns. The terms "successors" and "assigns"
shall include any person, corporation, partnership or other entity that buys all
or substantially all of the Company's assets or all of its stock, or with which
the Company merges or consolidates. The rights, duties and benefits to
Executive hereunder are personal to him, and no such right or benefit may be
assigned by him.
(i) BINDING EFFECT. This Agreement is binding upon the parties
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and permitted assigns.
(j) WAIVER OF BREACH. The waiver by the Company or Executive of a
breach of any provision of this Agreement by Executive or the Company may not
operate or be construed as a waiver of any subsequent breach.
ppc\c:\aps\dinicola.wpd
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
By: /s/ ROBERT J. DINICOLA 10/25/96
-----------------------------------
Robert J. DiNicola
ZALE CORPORATION
By: /s/ MERRILL J. WERTHEIMER 10/30/96
-----------------------------------
Merrill J. Wertheimer
Its: E.V.P.
--------------------------------
Compensation Committee of the Zale
Corporation Board of Directors
By: /s/ RICHARD C. MARCUS 10/23/96
-----------------------------------
Richard C. Marcus
Its: Chairman
--------------------------------
11
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of June 6, 1996 between ZALE
CORPORATION, a Delaware corporation (the "Corporation") and Andrea Jung (the
"Indemnitee").
W I T N E S S E T H:
WHEREAS, it is essential to the Corporation to attract as directors the
most capable persons available;
WHEREAS, the Corporation has requested that the Indemnitee become a member
of the Board of Directors of the Corporation effective June 6, 1996 (the
"Commencement Time") and the Indemnitee has agreed so to serve in part upon the
basis of the indemnification and other agreements provided for and referred to
in this Agreement, including Section 10 hereof;
WHEREAS, both the Corporation and the Indemnitee recognize the increased
risk of litigation and other claims being asserted against directors of public
companies in today's environment;
WHEREAS, the Corporation's Restated Certificate of Incorporation requires
the Corporation to indemnify its directors as set forth therein and expressly
authorizes the Corporation to enter into agreements with its directors for the
purpose of providing for such indemnification, and the Indemnitee has agreed to
serve as a director of the Corporation in part in reliance on such provisions;
WHEREAS, in recognition of the Indemnitee's need for substantial protection
against personal liability in order to enhance the Indemnitee's commencement and
continued service to the Corporation in an effective manner, the difficulty of
finding adequate director and officer liability insurance coverage and the
Indemnitee's reliance on the aforesaid provisions in the Corporation's Restated
Certificate of Incorporation, and, in part to provide the Indemnitee with
specific contractual assurance that the protection promised by such provisions
will be available to the Indemnitee (regardless of, among other things, any
amendment to or revocation of such provisions of the Certificate of
Incorporation, future financial difficulties of the Corporation, any change in
the composition of the Corporation's board of directors or the occurrence of any
acquisition transaction relating to the Corporation); and
<PAGE>
WHEREAS, the Corporation wishes to provide in this Agreement for the
effective indemnification of and the advancing of expenses to the Indemnitee as
set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the Indemnitee
agreeing to serve the Corporation directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. INDEMNIFICATION
a. AGREEMENT TO INDEMNIFY. Subject to Section 3 hereof, the Corporation
shall indemnify the Indemnitee to the full extent permitted by law
against expenses (including attorneys' and other professionals' fees
and other out-of- pocket expenses), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the Indemnitee in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
in nature ("Proceeding") in which the Indemnitee was or is or is
threatened to be made a party or in which the Indemnitee testifies by
reason of (i) the fact that the Indemnitee is or was a director,
officer, employee or agent at any time after the Commencement Time of
the Corporation or is or was at any time after the Commencement Time
serving at the request of the Corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and (ii) any
acts or omissions by the Indemnitee in such capacity that occurred
after the Commencement Time, so long as the Indemnitee acted or
omitted to act in good faith and in a manner that the Indemnitee (x)
reasonably believed to be in or not opposed to the best interests of
the Corporation and (y) with respect to any criminal action or
proceeding, had reasonable cause to believe was lawful; PROVIDED,
HOWEVER, that if a court of competent jurisdiction, after exhaustion
of all appeals therefrom, adjudges the Indemnitee to be liable to the
Corporation for any amount or if the Indemnitee pays an amount in
settlement to the Corporation, the Corporation may indemnify the
Indemnitee for such amount only with the approval of such court.
b. EXCLUSIONS. The Corporation shall not be liable under this Agreement
to make any payment to the Indemnitee:
2
<PAGE>
i. for which payment has previously been actually made to the
Indemnitee under a valid and collectible insurance policy, except
in respect of any excess beyond the amount of payment under such
insurance;
ii. for which payment has previously been actually made to the
Indemnitee by the Corporation other than pursuant to this
Agreement, except in respect of any excess beyond the amount of
such payment; and
iii. for an accounting of profits made from the purchase or sale by
the Indemnitee of securities of the Corporation within the
meaning of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or similar provisions of any state law;
c. STANDARDS OF INDEMNIFICATION. In connection with any determination as
to whether the Indemnitee is entitled to be indemnified or advanced
expenses hereunder, to the maximum extent permitted by law, the burden
of proof shall be on the Corporation to establish that Indemnitee is
not so entitled. In connection with any action by the Indemnitee to
enforce this Agreement, to the maximum extent permitted by law,
neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made
a determination prior to the commencement of any action by the
Indemnitee under Section 5 hereof that indemnification of the claimant
is proper under the circumstances because the Indemnitee has met the
applicable standard of conduct, nor an actual determination by the
Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable
standard of conduct. For purposes of this Agreement, the termination
of any Proceeding by judgment, order, settlement, conviction or upon a
plea of NOLO CONTENDERE or its equivalent, shall not, of itself,
create a presumption that the Indemnitee did not act in good faith and
in a manner which the Indemnitee reasonably believed to be in or not
opposed to the best interests of the Corporation or with respect to
any criminal Proceeding, had reasonable cause to believe that the
conduct of the Indemnitee was unlawful.
3
<PAGE>
2. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Agreement, after the
Indemnitee has been successful on the merits or otherwise, including the
dismissal of a Proceeding without prejudice or the settlement of a Proceeding
without admission of liability, in defense of any Proceeding or in defense of
any claim, issue or matter therein, the Corporation, in accordance with Section
145(c) of the General Corporation Law of the State of Delaware, shall indemnify
the Indemnitee against all expenses (including attorneys' and other
professionals' fees and other out-of-pocket expenses) actually and reasonably
incurred by the Indemnitee in connection therewith.
3. DETERMINATION OF RIGHT OF INDEMNIFICATION.
Any indemnification under Section 1 (unless otherwise ordered by a court)
shall be made by the Corporation only following receipt of a written demand by
the Indemnitee and only (x) if, in the specific case there has been no
determination that indemnification of the Indemnitee is not proper in the
circumstances because the Indemnitee has not met the applicable standard of
conduct set forth in Section 1 or (y) if (but only if) required by Delaware law,
upon a determination that indemnification of the Indemnitee is proper in the
circumstances because the Indemnitee has met the applicable standard of conduct
set forth in Section 1. Any such determination shall be made within 30 days
from the date the written request of the Indemnitee is received by the
Corporation either (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who are not or were not parties to such Proceeding, (ii)
if such a quorum is not obtainable or, even if obtainable if a quorum of
disinterested directors so directs, or, if a change in control (as defined
below) has occurred subsequent to the Effective Date of the Plan of
Reorganization, by the written opinion of independent legal counsel selected by
the Board of Directors of the Corporation (or if a change of control has so
occurred, selected by the Indemnitee with the consent of the Corporation, which
consent shall not be unreasonably withheld) or (iii) by the stockholders of the
Corporation.
A "change in control" shall be deemed to have occurred if (i) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended), other than a Trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock in the Corporation, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly of securities of the Corporation representing 51% or more
of the total voting power represented by the Corporation's then outstanding
Voting Securities, (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the board of directors of the
Corporation and any new
4
<PAGE>
director whose election by the board of directors or nomination for election
by the Corporation's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority
thereof, or (iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a
merger or consolidation which would result in the Voting Securities of the
Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting Securities
of the surviving entity) at least 80% of the total voting power represented
by the Voting Securities of the Corporation or such surviving entity
outstanding immediately after such merger or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation and
dissolution of the Corporation or an agreement for the sale or disposition by
the Corporation of all or substantially all the Corporation's assets;
provided, however, that any transaction that would otherwise be a change in
control under clause (iii) hereof which is approved and recommended in
advance by the Corporation's board of directors shall not be deemed a change
in control. For purpose of the definition of change in control, the term
"Voting Securities" shall mean any securities of the Corporation which vote
generally in the election of directors.
The term "independent legal counsel" as used herein, means a law firm, an
attorney or a member of a law firm that is experienced in matters of corporate
law and neither at the time of engagement is, nor at any time during the five
years preceding the date of the engagement by the Indemnitee has been, retained
to represent (i) either the Corporation or the Indemnitee in any matter material
to either party or (ii) any other party to a Proceeding giving rise to a claim
for indemnification hereunder. The term "independent legal counsel" shall not
include any person who, under the applicable standards of professional conduct
prevailing at the time of the representation, would have a conflict of interest
in representing either the Corporation or the Indemnitee in an action to
determine the Indemnitee's rights under the provisions of the Corporation's
Certificate of Incorporation, Bylaws or any agreement upon which the Indemnitee
relies to establish the Indemnitee's right to indemnification or advancement of
expenses.
The Corporation agrees to pay the reasonable fees of the independent legal
counsel and to indemnify fully such independent legal counsel against any and
all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or the engagement of such
independent legal counsel pursuant hereto.
5
<PAGE>
4. ADVANCES OF EXPENSES.
Expenses (including attorneys' fees) incurred by the Indemnitee in
defending any Proceeding shall be paid by the Corporation upon written request
of the Indemnitee in advance of the final disposition of such Proceeding if the
Corporation has received an undertaking by or on behalf of the Indemnitee, in
substantially the form attached hereto as ANNEX A. The obligation of the
Corporation to advance expenses pursuant to this Section 4 shall be subject to
the condition that if, when and to the extent a determination is made as
provided under Section 3 hereof that the Indemnitee would not be permitted to be
indemnified as provided therein, then the Corporation shall be entitled to be
reimbursed by the Indemnitee as provided in ANNEX A for all amounts theretofore
paid in advance; PROVIDED, HOWEVER, that if Indemnitee has commenced legal
proceedings in a court of competent jurisdiction to secure a determination that
the Indemnitee should be indemnified under applicable law, any determination
made pursuant to this Agreement that the Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding and the Indemnitee shall
not be required to reimburse the Corporation for any advances hereunder until a
final judicial determination is made with respect thereto (as to which all
appeals therefrom have been exhausted).
In any event, the obligation of the Indemnitee to reimburse the Corporation
for advances shall be unsecured and no interest will be charged thereon.
5. PROCEDURE FOR MAKING DEMAND.
a. Payments for any indemnification to which the Indemnitee is entitled
pursuant to Section 1 hereof shall be made by the Corporation no later
than 30 days after the receipt of a written demand made by the
Indemnitee as provided in Section 3 hereof.
b. Payments of expenses to which the Indemnitee is entitled pursuant to
Section 2 hereof shall be made by the Corporation no later than ten
days after receipt by the Corporation of the written demand for
payment from the Indemnitee.
c. Advancement of expenses to the extent provided by Section 4 hereof
shall be made by the Corporation no later than 30 days after receipt
by the Corporation of the written undertaking referred to in Section 4
hereof.
d. The right to indemnification or advances hereunder shall be
enforceable by each Indemnitee in any court of competent jurisdiction
if the Board of Directors, independent legal counsel or stockholders
improperly denies the
6
<PAGE>
claim, in whole or in part or if indemnification or advancement of
expenses is not made within the time specified herein. In any such
event, or if there has been no determination under Section 3, the
Indemnitee shall have the right to commence litigation in any such
court in the States of Delaware or New York or the state(s) of
director's residence or employment, having subject matter
jurisdiction thereof, and in which venue is proper, seeking an
initial determination by the court or challenging any such
determination under this Agreement or any aspect thereof, and the
Corporation hereby consents to service of process and to appear in any
such proceeding. Any determination as to the right to
indemnification, including expense reimbursement, hereunder shall
otherwise be conclusive and binding on the Corporation and the
Indemnitee.
e. The Corporation shall indemnify the Indemnitee against any and all
expenses (including attorneys' and other professionals' fees and other
out-of-pocket expenses) and, if requested by the Indemnitee, shall,
within ten days of such request, advance such expenses to Director
which are incurred by the Indemnitee in connection with any claim
asserted against or action brought by the Indemnitee for (i)
indemnification hereunder or advance payment of expenses by the
Corporation under this Agreement (or the Corporation's Certificate of
Incorporation or By-Laws now or hereafter in effect) and/or (ii)
recovery under any director and officer liability insurance policies
maintained by the Corporation, regardless of whether the Indemnitee
ultimately is determined to be entitled to such indemnification,
advance expense payment or insurance recovery, as the case may be.
6. SUBROGATION.
In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Indemnitee who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Corporation effectively to bring suit to
enforce such rights.
7. EFFECT OF CHANGES IN LAW OR CORPORATE DOCUMENTS.
No change in the Corporation's Certificate of Incorporation or Bylaws or
the Delaware General Corporation Law subsequent to the date first above written
shall have the effect of limiting or eliminating the indemnification available
under this Agreement as to any act, omission or capacity for which this
Agreement provides indemnification at the
7
<PAGE>
time of such act, omission or capacity. If any change after the date of this
Agreement in any applicable law, statute or rule expands the power of the
Corporation to indemnify the Indemnitee, such change shall be within the
purview of the Indemnitee's rights and the Corporation's obligations under
this Agreement. If any change in applicable law, statute or rule narrows the
right of the Corporation to indemnify the Indemnitee, such change, except to
the extent otherwise required by law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights or
obligations hereunder.
8. DEFINITION OF "CORPORATION."
For purposes of this Agreement, references to "the Corporation" shall
include, in addition to the resulting or surviving corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director of such constituent
corporation after the Effective Date or is or was serving at the request of such
constituent corporation as a director, officer, employee, trustee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise after the Effective Date, shall stand in the same position
under this Agreement with respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation if its separate
existence had continued.
9. PARTIAL INDEMNITY.
If the Indemnitee is entitled under any provision of this Agreement to
indemnification by the Corporation for some or a portion of the expenses,
judgments, fines and amounts paid in settlement but not, however, for all of the
total amount thereof, the Corporation shall nevertheless indemnify the
Indemnitee for the portion thereof to which the Indemnitee is entitled.
10. SECURITY FOR OBLIGATIONS OF THE CORPORATION; TRUST FUND.
The Corporation and the Indemnitee agree that pursuant to the terms of the
insurance policies obtained by the Corporation with respect to director and
officer liability coverage, it is appropriate that the obligations of the
Corporation pursuant to this Agreement be secured in a manner satisfactory to
the Indemnitee. Consequently, on November 24, 1993, Zale Corporation and the
Corporation established a Trust Fund ("Fund") pursuant to a Trust Agreement in
form and substance satisfactory to the Indemnitee, which provides for the
deposit by Zale Delaware, Inc. and the Corporation as the Fund, for the benefit
of the Indemnitee and any other directors from time to time of
8
<PAGE>
Zale Delaware, Inc. and the Corporation (collectively, the "Beneficiaries"),
of at least $500,000 plus if such amount is less than $1,000,000 an
additional pro rata amount for each of the next ten months thereafter until
the Fund aggregates $1,000,000 (the "Minimum Balance") in the aggregate for
Zale Delaware, Inc. and the Corporation, in cash or cash equivalents or, at
the Corporation's option with the consent of a majority of the Beneficiaries,
a standby letter of credit from The First National Bank of Boston or other
institution acceptable to a majority of the Beneficiaries; provided that the
form of any such standby letter must be satisfactory to each Indemnitee.
Initially, the terms of the Trust Agreement provides, among other things,
that (i) the Trust Fund shall be used, when requested by any Beneficiary, to
satisfy the obligations of the Corporation pursuant to this Agreement and
other like agreements of Zale Delaware, Inc. and the Corporation with
Beneficiaries with respect to any and all payments provided for hereunder or
thereunder; (ii) the Fund shall not be revoked or the principal thereof
invaded for any other purpose without the written consent of the Indemnitee;
(iii) the Fund shall continue to be funded by Zale Delaware, Inc. and the
Corporation, jointly and severally, as necessary to maintain the Minimum
Balance, once established; and (iv) the Trustee under the Trust Agreement
shall be chosen by a majority of the Beneficiaries. Nothing in the Trust
Agreement shall relieve the Corporation of any of its obligations under this
Agreement, and this Agreement shall be amended as necessary to be consistent
with the terms of the Trust Agreement as ultimately executed.
11. SUCCESSORS.
The indemnification and advancement of expenses and other rights granted
and obligations undertaken pursuant to this Agreement shall continue after the
Indemnitee has ceased to be a director, officer, employee or agent as referred
to in clause (i) of Section 1(a) hereof and shall be binding upon the successors
and assigns of the Corporation and shall inure to the benefit of the heirs,
executors, administrators and legal representatives of the Indemnitee and the
Corporation.
12. CONTRACT RIGHTS NOT EXCLUSIVE.
The contract rights conferred by this Agreement shall be in addition to,
but not exclusive of, any other right which the Indemnitee may have or may
hereafter acquire under any statute, the Certificate of Incorporation or Bylaws
of the Corporation, any agreement by the vote of stockholders or disinterested
directors of the Corporation or otherwise, both as to action in the Indemnitee's
official capacity and as to action in another capacity while holding such
office. The rights granted in this Agreement supersede any similar right
granted under any previous Agreement between the Corporation and the Indemnitee
with respect to the subject matter hereof.
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<PAGE>
13. THE INDEMNITEE'S OBLIGATIONS.
The Indemnitee shall promptly advise the Corporation in writing of the
institution of any Proceeding which is or may be subject to this Agreement and
keep the Corporation generally informed of and consult with the Corporation with
respect to, the status and defense of any such Proceeding.
14. SEVERABILITY.
If any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent jurisdiction,
such prohibition shall not affect the validity of the remaining provisions of
this Agreement.
15. MODIFICATION AND WAIVER.
No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by both of the parties hereto.
16. HEADINGS.
The descriptive headings of the Sections of this Agreement are inserted for
convenience and shall not control or affect the meaning or construction of any
of the provisions hereof.
17. NOTICES.
Any request, notice, direction, authorization, consent, waiver, demand or
other communication permitted or authorized by this Agreement to be made upon,
given or furnished to or filed with the Corporation or the Indemnitee by the
other party hereto shall be sufficient for every purpose hereunder if in writing
(including telecopy communication) and telecopied or delivered by hand
(including by courier service) as follows:
If to the Corporation, to it at:
Zale Corporation
Attn: Alan P. Shor, Esq.
901 West Walnut Hill Lane
Irving, Texas 75038-1003
Telecopy No.: (972) 580-4934
or
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<PAGE>
If to the Indemnitee, to her at:
Andrea Jung
President, Global Marketing
Avon Products
9 West 57th Street
New York, New York 10019
Telecopy No.: (212) 546-7626
or, in either case, such other address as shall have been set forth in a notice
delivered in accordance with this Section. All such communications shall, when
so telecopied or delivered by hand, be effective when telecopied with
confirmation of receipt or received by the addressee, respectively. Any party
that telecopies any communication hereunder to the other party shall, on the
same date as such telecopy is transmitted, also send, by first class mail,
postage prepaid and addressed to such party as specified above, an original copy
of the communication so transmitted.
18. CHOICE OF LAW.
This Agreement will be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
in such state, without giving effect to the principles of conflicts of laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
ZALE CORPORATION
By: /s/ ALAN P. SHOR
-----------------------------------
Alan P. Shor
Sr. Vice President - Administration
General Counsel and Secretary
THE INDEMNITEE
By: /s/ ANDREA JUNG
-----------------------------------
Andrea Jung
11
<PAGE>
ANNEX A
UNDERTAKING AGREEMENT
AGREEMENT dated June 6, 1996 between Zale Corporation, a Delaware
corporation (the "Corporation"), and Andrea Jung, a member of the Board of
Directors of the Corporation (the "Indemnitee").
WHEREAS, the Indemnitee has become involved in investigations, claims,
actions, suits or proceedings (collectively, "Proceedings") which have arisen as
a result of the Indemnitee's service to the Corporation;
WHEREAS, the Indemnitee desires that the Corporation pay any and all
expenses (including, but not limited to, attorneys' fees and court costs)
actually and reasonably incurred by the Indemnitee or on the Indemnitee's behalf
in defending or investigating any such Proceedings and that such payment be made
in advance of the final disposition of such Proceedings to the extent that the
Indemnitee has not been previously reimbursed by insurance;
WHEREAS, the Corporation is willing to make such payments but, in
accordance with Section 145 of the General Corporation Law of the State of
Delaware, the Corporation may make such payments only if it receives an
undertaking to repay from the Indemnitee; and
WHEREAS, the Indemnitee is willing to give such an undertaking.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, the Corporation and the Indemnitee agree as
follows:
1. In regard to any advance payments made by the Corporation to the
Indemnitee pursuant to the terms of the Indemnification Agreement dated as of
June 6, 1996 between the Corporation and the Indemnitee (the "Indemnification
Agreement") or pursuant to Article Seventh of the Certificate of Incorporation
of the Corporation, the Indemnitee hereby undertakes and agrees to repay to the
Corporation any and all amounts so paid promptly and in any event within 30 days
after the disposition, including exhaustion of all appeals therefrom of any
litigation or threatened litigation on account of which payments were made if it
is determined that the Indemnitee is not entitled to indemnification pursuant to
the Indemnification Agreement, the Certificate of Incorporation or the General
Corporation Law of the State of Delaware.
2. This Agreement shall not affect in any manner the rights which the
Indemnitee may have against the Corporation, any insurer or any other person to
seek indemnification for or reimbursement of any expenses referred to herein or
any judgment which may be rendered in any litigation or proceeding.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
ZALE CORPORATION
---------------------------------------
Alan P. Shor
Sr. Vice President - Administration
General Counsel and Secretary
THE INDEMNITEE
---------------------------------------
Andrea Jung
<PAGE>
EXHIBIT 11
ZALE CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Common Share
(unaudited)
(amounts in thousands except per share amounts)
Three Months Ended
October 31,
---------------------
1996 1995
---------- -------
Primary:
Net earnings (loss) applicable to common stock $ (1,138) $ 91
---------- -------
---------- -------
Shares
Weighted average number of common shares
outstanding 35,217 34,985
Assuming exercise of options reduced by the
number of shares which could have been
purchased with the proceeds from exercise
of such options ---(1) 582
Assuming exercise of warrants reduced by
the number of shares which could have been
purchased with the proceeds from exercise
of such warrants ---(1) 724
---------- -------
Weighted average number of common shares
outstanding as adjusted 35,217 36,291
---------- -------
---------- -------
Net earnings (loss) per common share $ (0.03) $ ---
---------- -------
---------- -------
Fully Diluted:
Net earnings (loss) applicable to common stock $ (1,138) $ 91
---------- -------
---------- -------
Shares
Weighted average number of common shares
outstanding 35,217 34,985
Assuming exercise of options reduced by the
number of shares which could have been
purchased with the proceeds from exercise
of such options ---(1) 605
Assuming exercise of warrants reduced by
the number of shares which could have been
purchased with the proceeds from exercise
of such warrants ---(1) 749
---------- -------
Weighted average number of common shares
outstanding as adjusted 35,217 36,339
---------- -------
---------- -------
Net earnings (loss) per common share $ (0.03) $ ---
---------- -------
---------- -------
(1) Not used in the calculation of weighted average number of common shares
outstanding due to the antidilutive effect of the common stock equivalents.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the October
31, 1996 consolidated financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 55,973
<SECURITIES> 0
<RECEIVABLES> 423,185<F1>
<ALLOWANCES> 0
<INVENTORY> 602,607
<CURRENT-ASSETS> 1,123,568
<PP&E> 120,750<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,344,595
<CURRENT-LIABILITIES> 274,901
<BONDS> 490,736
0
0
<COMMON> 353
<OTHER-SE> 474,608
<TOTAL-LIABILITY-AND-EQUITY> 1,344,595
<SALES> 230,779
<TOTAL-REVENUES> 230,779
<CGS> 120,044
<TOTAL-COSTS> 120,044
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,998
<INCOME-PRETAX> (1,792)
<INCOME-TAX> (654)
<INCOME-CONTINUING> (1,138)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,138)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
<FN>
<F1>This asset value represents a net amount.
</FN>
</TABLE>
